America’s structural economic problems

September 28, 2010

Some economic theorists suggest that our severe unemployment problems are “structural”. “Structural”, to me, means the prevailing employment patterns of the past decade or two (or three) are not sustainable. We are not generating or distributing wealth in a way that can sustain healthy economic activity. The unsustainable patterns were pushed as far as they could go, before we finally pushed ourselves over a cliff. Now we need to form new employment patterns — ones that reflect sustainable economic activity. And this “restructuring”, or “recalculation”, or “rebalancing”, whatever you want to call it, could take time.

Paul Krugman disagrees. He sardonically refutes such claims:

What can be done about mass unemployment? All the wise heads agree: there are no quick or easy answers. There is work to be done, but workers aren’t ready to do it — they’re in the wrong places, or they have the wrong skills. Our problems are “structural,” and will take many years to solve.

But don’t bother asking for evidence that justifies this bleak view. There isn’t any. On the contrary, all the facts suggest that high unemployment in America is the result of inadequate demand — full stop. Saying that there are no easy answers sounds wise, but it’s actually foolish: our unemployment crisis could be cured very quickly if we had the intellectual clarity and political will to act.

I don’t entirely disagree with Krugman. Yes, we have demand problems. But I believe we have structural problems as well. And I don’t think our unemployment crisis can be cured “very quickly”. You see, Krugman is a full-bodied Keynesian, and the Keynesian prescription for reeling in a slack in employment is to equip everyone with shovels and tell them to dig holes (searching for those $100 bills that were pre-buried there). Yes, you can “easily” correct unemployment problems this way. But you will not fix structural economic problems this way. In fact, you might make them worse, diverting valuable limited resources toward very unproductive work.

Also, as I was watching Stephen Colbert’s congressional testimony from last week, I picked up on a point he makes about American farms suffering labor shortages. I did a quick google search and found this: Farm Labor Crisis: Sen. Feinstein Introduces Legislation to Relieve Worker Shortage in Agriculture.

“Today across the United States, there are not enough agricultural workers to pick, prune, pack or harvest our country´s crops. With an inadequate supply of workers, farmers from Maine to California, and from Washington State to Georgia, have watched their produce rot and their farms lay fallow over the years,” Senator Feinstein said.

“As a result, billions of dollars are being drained out of our already struggling economy. This legislation would help to ensure a consistent, reliable agriculture work force to ensure that farmers and growers never again lose their crops because of a lack of workers.”

Across the country, farmers are reporting that they do not have enough labor to plant, tend and harvest their crops. There are not enough workers to milk cows. As a result, farmers have been forced to decrease the size of their farms and switch to less labor intensive and less profitable crops. Efforts have been made for years to get Americans to do the work, but they simply won´t do it.

Other farmers are simply closing up shop. Between 2007 and 2008, 1.56 million acres of farmland were shut down in the United States.

I’m not suggesting that we’re gonna solve our unemployment problems by filling out our agricultural labor shortages. All I’m pointing out is that we DO have structural issues, and there does exist evidence of said structural issues, contrary to Krugman’s claim that no such evidence exists.

To see and understand America’s structural employment problems, you must step back and think globally. Our structural employment problems are evidenced by our trade deficit, our ever-mounting debt (both public and private), and the exodus of manufacturing jobs to cheap-labor markets overseas. We can’t all become lawyers and bankers and real-estate agents. Somebody’s got to farm our lands and pick our crops. Somebody’s got to manufacture “stuff”, the stuff we actually buy and use and export to other countries in exchange for their “stuff”. We can’t all just make “money”, digging holes and such.

UPDATE: Krugman clarified himself. I think we more or less agree.


One Response to “America’s structural economic problems”

  1. Thanks again. My view is that the US has overdosed on cheap money, and needs to wean itself off its addiction. Some living standards need to come down. If the burden of doing this is shared too unevenly, there’ll be even bigger problems than we have today.

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